Facebook Handled their IPO Exactly Right

Andrews Ross Sorkin wrote a piece for the NY Times that was just ridiculous. He put the blame squarely on the back of the CFO of FB. Talk about getting it 180 degrees wrong.

Have you ever been to an auction where the selling party told a buyer to reduce their price because they were worried that the item might not hold its value ? Neither have I.  If the CFO of Facebook came on SharkTank and told me that he was able to sell his shares to the public for $38 a share, but turned down the opportunity, I would crush him for being an idiot.

Facebook was able to raise about 10 BILLION DOLLARS in this IPO. The CFO’s job is not to manage shareholder portfolios. His job is to help Facebook succeed. I don’t know about you, but putting 10 BILLION DOLLARS in the bank in my opinion is one way to help them succeed.

Who’s job is it to help manage the portfolio’s of FB investors ? If an investor doesn’t manage their own portfolio, the brokers who sold them the stock are responsible.  It’s their job to read the prospectus if you as an investor are too lazy to do so.  It is the job of the broker to help the investor understand the value of the company and make a buying decision. No question that there are a lot of brokers out there that did not do their jobs.

As far as traders who bought the stock hoping for a pop. No one cares about them. Seriously. You trade, you know you are going to lose on trades. That is how things work.

I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault.  I know that no one sells me shares of stock because they expect the price of the stock to go up.  So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you.  In this case it was me.

If the goal of the company is to maximize the cash obtained from the IPO, then the CFO should absolutely price the stock to maximize the return. If the goal of the company is to get a 1 day pop to make a PR splash , that is a completely different strategy. It obviously was not the strategy of Facebook.  Facebook maximized the cash available to it. They have been very clear that they will not manage the stock, they will manage the company to reach the goals they have been very open and honest about. Good for them.

Andrew did try to make one cogent argument that Facebook faced the risk of employees leaving because their options were underwater.  Apparently Andrew forgot that companies can re-price their options. Problem solved.

I will leave you with this article from a few years back when Google was at a similar point, having lost more than TWICE the market cap valuation that Facebook has lost to this point

http://www.cbsnews.com/2100-500395_162-4750463.html

February 11, 2009 1:43 PM
Google Inc. is showing its love for its employees by giving them a second chance to profit from their wilting stock options. But the move irked shareholders still stuck with agonizing losses on their investments.Nevertheless, Google’s willingness to reset more than 8 million stock options at lower prices is likely to spur similar gestures by companies hoping to motivate their employees during a demoralizing recession.

“There is a lot of momentum building” to reprice stock options, said Alexander Cwirko-Godycki, a research manager for executive compensation specialist Equilar. “Everyone has just been sort of waiting for a big name to do it.”

Google already has been joined by coffee chain Starbucks Corp., which unveiled a proposal to allow its employees to swap their existing stock options for new ones that will be more likely to put cash in their pockets.

But Google’s repricing program made a bigger splash because it’s far more generous to the employees — much to the dismay of the shareholders who have seen their holdings in the Internet search leader plunge by 57 percent, or a collective $130 billion, since the stock peaked at $747 per share in 2007.

Google shares surged $18.20, or nearly 6 percent, to close Friday at $324.70 as investors cheered the company’s fourth-quarter earnings report. But analysts said the rally probably would have been even more robust if not for the decision to reprice the stock options.

“A lot of people just hate it,” said Broadpoint AmTech analyst Rob Sanderson. “I had one money manager tell me, `The next time you talk to Google’s management, tell them I want all the stock I bought at $400 a few months ago to be repriced at $285.”‘

Understanding the angst triggered by option repricing requires an explanation on how the perquisites work.

Employees at thousands of companies generally receive a bundle of stock options when they are hired, and frequently receive additional grants in subsequent years.

The options are assigned what is known as an “exercise price” — the employee’s cost for cashing in the reward. This price typically equals the stock’s price at the time of the grant.

The more a company’s stock price rises above the option price, the higher the profit for employees. The idea is to inspire workers to put in longer hours and come up with better ideas — to increase the company’s value and the employees’ potential windfall.

But if a stock price plunges below the option price — a phenomenon known as being “underwater” — employees can become dejected, distracted and perhaps even tempted to entertain other job offers, especially if a large portion of the compensation comes in the form of options.

The problem of underwater options faces 72 percent of the companies in the Fortune 500, based on Equilar’s analysis of average exercise prices in mid-December.

Google’s work force is awash in underwater options: Nearly 17,000 employees are holding more than 8 million stock options with an exercise price of at least $400.

Those are the options likely to be exchanged in a program running from Jan. 29 through March 3. The new options are expected to have an exercise price tied to the market value of Google’s stock in early March.

Even though the repricing will result in $460 million in accounting charges, Google reasoned the cost is acceptable, to avoid morale and retention problems among its 20,222 workers. Since its inception in 1998, Google has given options to virtually all of its employees, turning thousands of them into multimillionaires.

“We think it’s a good deal for shareholders and for our employees as well,” Google Chief Executive Eric Schmidt said Thursday.

Even though it has been cutting back on some perks, Google is still renowned for pampering employees — a trait that isn’t widely shared. That’s why Sanderson isn’t convinced Google’s repricing will cause other companies to follow suit.

“Google gives away free lunches to employees, but that didn’t compel everyone else to do it,” he said.

Did Google even need to be so magnanimous at a time when many people are simply happy to have a job?

“While we agree with management that it is in shareholders’ interests to keep Google employees motivated and retain the company’s focus on growth, we question the necessity of the (repricing) program given the current employment environment,” ThinkEquity analyst William Morrison wrote in a research report.

On the flip side, it could still be smart business to feel make workers feel wanted — even as millions of other people are unemployed.

“The reality is that talented people will always be able to find another job in any market,” Sanderson said. “And if you lose your intellectual capital, you could be losing the future of the company.”

Hoping to hold on to its employees, Google is extending the vesting period for each swapped option by a full year. Vesting refers to the time that must lapse before an option can be exercised. So a Google employee with an underwater option that vests in June 2010 would have to wait until June 2011 to exercise a repriced option.

Sanderson and Morrison both agree that Google could have lessened the backlash against its repricing by coming up with a program that didn’t sting its shareholders as much.

Besides raising issues of fairness, Google’s program threatens to lower future earnings per share by creating the need to issue more outstanding stock when the options are cashed in.

Google could have lessened the dilution experienced by its shareholders if it required employees to exchange anywhere from four to 10 of their current options for a repriced option. Or they could have traded for a share of restricted stock that would vest over several years.

It will probably take a few years before any definitive conclusions can be made about the wisdom of Google’s repricing, said Collins Stewart analyst Sandeep Aggarwal.

“If it turns out to be good for Google in the long run,” he said, “then it will be good for shareholders too.”

© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

119 thoughts on “Facebook Handled their IPO Exactly Right

  1. Mark,

    Business success does not equate to knowing how to run this country. I don’t believe a government can or should be run like a business. Business is about markets, and ruthless efficiency. Govt is by and for the people.

    You should read this from Whitney Tilson, if you haven’t already. I would love to read your response to his position. http://www.tilsonfunds.com/VotingObamaAgain.pdf

    Comment by Vafer Twokay (@vafer2k) -

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  7. Pingback: Mark Cuban explains why he lost a ton of money on Facebook stock | Geek Slop

  8. http://katamutiarague.com/

    Comment by Dimas Rangga -

  9. Pingback: Who Is to Blame for Facebook’s I.P.O.? A Mix of Responses | How To Create Social Network

  10. Pingback: IndigoReality » Facebook Investors Know Exactly Whom to Blame

  11. Pingback: Facebook Investors Know Exactly Whom to Blame | Open Source Thinktank

  12. Pingback: Facebook stocks ... - Page 8

  13. Mark Cuban is one of my Role Models of Success, many Blessings for you, amen.

    Comment by youarenotalonejeanetteperez -

  14. Genius. It`s high time someone wrote something so smart about the FB IPO.
    It`s appalling to watch how many `high profile` and `experienced` investors and bankers are blaming one another and his brother.
    Have they not learnt that you work hard for your cash? Do they not understand that the stock market is a place where you take chances not guarantees. It`s a betting house. A posh gambling hall.

    The question right now is, how will FB actually utilize the cash and valuation they have gained. Lets not be stupid, even if the stocks are 50% below the IPO price, they still have value.
    I wonder what those big criers that bought in at the peak and are still sitting on their shares in 20 months from now, when they have a value of 600% above the IPO price will have to say. Will they still be pointing their fingers at one another, or will they be bragging to the world how clever they are for buying in and not rushing out?! Time will tell. And only time.

    But, and a big but, will the team at FB come out with something creative and money making at last, or not!? As of now, they really seem vulnerable. They`ve tried and failed on too many fronts for a company that hasn`t actually proven significant profits. Google tried and failed on many fronts too, but Google have cash rolling in daily, and repeat customers. FB? not really, people are starting to move away, and move on. They really need to come up with something creative that will tickle the fantasies of the real [not the fake] members, and stop them from signing off, make them daily visitors just like they were when they first signed on and make them encourage their friends to join. They then have to utilize this database and find a way to take some cash from their pockets, and put them into the pockets of those spending on FB, just like Google did and do. Because we all know, Google advertising, is by far a bigger rip-off than the FB IPO, but you know what, they`re giving a return to the big [and medium and some small] clients that advertise with them and they keep coming back for more.

    But, if FB don`t get off their backside (and I would have suggested MZ buys himself a suit, just to respect the people that invested in him, because that is morality) and actually DO SOMETHING, then it wont be long before FB is dead and buried like MySpace. I wouldn`t be surprised if I went to GoDaddy in 20 years from now and found the domain facebook.com available for register.

    So FB guys, do something original. Just do it!!

    Comment by Harry Leitner -

  15. Pingback: Mullets, IPO done right, NFL Apps & Taylor Swift

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  17. Spot on Mark.

    Comment by Adam Hudson -

  18. Pingback: Facebook Investors Know Exactly Whom to Blame | CurrencyCore.com

  19. Pingback: Who should Facebook investors blame for their losses? - Psychology and Money Management

  20. Time Business writer @SamGustin takes your side, Mark – for the most part

    http://business.time.com/2012/09/06/facebook-blame-game-whos-at-fault-for-ipo-debacle/?iid=biz-main-lede

    Comment by Nancy Fox (@NancyFox) -

  21. Pingback: Mark Cuban to investors: Don’t blame Facebook because you willingly paid $38 for its shares | AVORAH - Geek Lifestyle Reviews And Views - TECH, GADGETS, STYLE.

  22. Pingback: Facebook Blame-Game: Who’s at Fault for IPO Debacle? | Business | TIME.com

  23. Pingback: Mark Cuban Gets Facebook; Most Others Don’t | Best Stocks For 2012

  24. Caveat emptor is not a popular perspective amongst the “It’s not my fault!” blame-everyone-but-myself types.

    Comment by Roy Cobden -

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  26. Pingback: Understanding the Facebook IPO Drama: Why has Facebook’s stock price gone down since the IPO, and should I buy now?

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  28. With you all the way Mark

    Comment by Henry Tjham -

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  45. Well said Mark, couldn’t agree more..

    Comment by Preet Singh (@preetpann) -

  46. Pingback: Should raising money be a blood sport? | Money Freedom

  47. On target. And I would like to add a few words about Mark Zuckerberg’s flip-flops and hoodie which have been the prey of some very bad tasting comments from a few sour anal-ysts.
    What’s their advice ?
    Get a suit and a tie from Lehman Brothers ?
    Call Al Capone to run the place?

    Comment by gilcatt -

  48. Pingback: Stocks and Sectors » Blog Archive » Mark Cuban Is Dead Right About Facebook’s IPO – It Was A Success

  49. Absolutely right Mark, glad someone is telling the truth.

    Comment by Shortzilla (@short_zilla) -

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  54. bulls eye!

    Comment by Sebastian Schneider -

  55. Most of these guys didnt read the details and now they are losing its funny

    Comment by Derrick (@babicare) -

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  61. Everyone loves to place blame – and at the same time, they want magic to happen overnight. Facebook will be just fine.

    Comment by Avery D'Alessandro -

  62. What the Facebook IPO shines a light on is that for some reason, many who would never consider making portfolio investments in traditional Blue Chip’s are willing to jump in the deep end (IPOs) when it’s a tech company with a familiar name.

    I would love to know what the last round of private funding went for per share, and how much that had to do with the initial price.

    Comment by Richard Elton (@ThoughtKloud) -

  63. Pingback: Should raising money be a blood sport? |

  64. Mark: I completely agree!

    The issue I have is with MS who sold shares it didn’t have to investors meaning MS shorted the FB IPO. If held, MS has made a killing on the deal…

    Comment by Skates (@Skates) -

  65. Pingback: Facebook IPO: ahora quieren la cabeza del CFODenken Über

  66. Facebook is a glorified message board. At the current 18ish it is still overvalued by a factor of 4.

    Your point about blaming the buyer though is spot on though. Nobody made anybody else write a check to own part of the company. Henry Blodget wrote a great article about the FB IPO and how nobody really ready their prospectus (including you?)

    http://www.businessinsider.com/facebook-stock-letter-shareholders

    Comment by Arlo Gilbert -

  67. Pingback: Facebook Handled their IPO Exactly Right - Tech World 411Tech World 411

  68. Pingback: Lots Of Blame To Go Around For Facebook’s IPO ‘Debacle’–But It Doesn’t Mean A Thing | Social Network Site

  69. Food for thought/rhetorical questions: what’s the difference between an investor and a shareholder? Who owns Facebook?

    Comment by Christian Romney (@christianromney) -

  70. Pingback: Lots Of Blame To Go Around For Facebook’s IPO ‘Debacle’–But It Doesn’t Mean A Thing | Social Network News

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  75. Hi Mark, I thought facebook raised 100 billion from their IPO, not 10 billion. I think that is why people are upset.

    Comment by alexlogic -

  76. You are wrong about “Apparently Andrew forgot that companies can re-price their options. Problem solved.” This is not legal anymore. IRS 409(a)

    http://www.startupcompanylawyer.com/2008/01/19/what-is-section-409a/

    Comment by Andrew Ouellet (@AndrewOuellet) -

  77. Pingback: Lots Of Blame To Go Around For Facebook’s IPO ‘Debacle’–But It Doesn’t Mean A Thing | Ready Made Social Network Site Guide

  78. Pingback: Facebook Handled their IPO Exactly Right | Max Clark

  79. Absolutely Mark! About time someone remembered that Facebook is in it to make a profit, so why complain when they try to?

    Comment by David Gross (@headhntrdave) -

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  84. What about oh, ‘Fiduciary Responsibility’? You heard me. As soon as they filed the paper work he had one, to his share holders, current and soon to be. Him and everyone else on the board.

    This issue was over priced and over sold. And the flood of class actions is just beginning. Squeezing every last dime that the market will bear is a share holder hostile act. And the primary reason that it happened was investment banker greed. These are the guys that should have been reigning it in.

    Comment by Rod McElrath (@rdmcelrath) -

  85. But there’s a difference between Facebook and Google. That is, Google upon their IPO in 2004 was already bringing in $800 million in revenue per quarter, much of that being cash with very little expenses. This is a number that Facebook could only dream of right now. Plus, Google IPO’d at $23 billion, a much, much lower valuation than Facebook’s $96 billion IPO.

    Plus, Google’s business structure is – and will always be – a cash machine. People search for products and information on Google. This allows Google to target users to view very specific products related to their search, making it more likely that they will click on those advertisements (Google’s way of revenue). This is not just big money, but big cash as the billing for these advertisements takes place within a few days, or at most, a month.

    I’ve never met a single person that uses Facebook and will click advertisements that they see as useful. Not saying relevant consumer information won’t be useful but it’s going to take a while for Facebook to find an advertising platform that they can push to consumers for revenue, without pushing the actual consumer away to another product. I think Facebook will also be able to do data mining and warehousing to sell large amounts of data to retailers (online and offline) and data collection companies.

    Comment by Derrick VanderWall -

  86. Pingback: Who Is to Blame for Facebook's I.P.O.? A Mix of Responses - NYTimes.com

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  88. Great analysis! I think you got it absolutely right.

    Comment by visionmd -

  89. Pingback: Lots Of Blame To Go Around For Facebook’s IPO ‘Debacle’–But It Doesn’t Mean A Thing | Social Web Tips

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  91. You’re exactly right – people really have to learn to do their own research and think for themselves. And, if they would have read the IPO letter from Mark Zuckerberg, they should have known that Facebook is NEVER going to be in it for the short term but instead for the long term.

    Thomas

    Comment by Mobile App Tycoon (@MobileAppTycoon) -

  92. Facebook shares were available pre-IPO on SharesPost. On March 22, they were valued in an auction at $42 which I thought was ridiculously high and passed. People were thinking this was Google and it’s really MySpace.

    Yes, Ebersman is FaceBook CFO and his duty is to FaceBook, the corporation. Full stop. Still, it appears that the employee shareholders have been stunned by their fall and that’s not a good morale going forward. (Is Saverin still a billionaire?)

    Technically, FB got a lot of money. If this were an exit, then they got theirs. But for a company that lives on goodwill, it’s a debacle.

    Comment by Chris Sears -

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  94. There are two points where Facebook share price take plummets (and they have nothing to do with actual monetization or any of the above issues).

    * * * * * * *
    (a) May 18 ($38.23) to May 30 ($28.19) = ↓$10.04

    – The thesis: people sold out of Apple in anticipation of the Facebook IPO. When Facebook fails to increase exponentially, the same sellers retreat back to Apple. Apple stock suddenly turns upwards the day after Facebook’s IPO.

    – The proof: Apple from April 9 ($623.23) to May 17 ($530.12) creates a loss of $93.11 / share. Facebook IPO on May 17 fails to take off; peaks on May 18. In the same eight-day timeframe as the Facebook price drop, Apple stock increases from May 18 ($530.38) to May 30 ($579.17) = ↑$48.79. This mechanism has been confirmed by the trading houses. Therefore, it can be easily stated that 25% of the valuation drop occurred because of speculation for a one-day payday.

    * * * * * * *
    (b) July 25 ($29.34) to August 2 ($20.04) = ↓$9.30

    – The thesis: Stocks sell off before the July 27 earnings report and continues to drop until August 2. What stops the decrease is a well-known earnings season trend: the beginning of “retailers” like Tanger Outlets reporting usually causes a migration back into the “technical” sector (As of this posting on August 23, Apple & Google have both jumped over $50 per share since August 2).

    – The proof: The commonly cited reason for the Facebook price drop was Wall Street’s complaint that Zuckerberg did not outline a plan for mobile monetization. The story that gets lost: Facebook beats “street estimates” for the quarter. Another 25% drop because a mobile monetization plan was not articulated: absence of proof is not the proof of absence.

    * * * * * * *
    It just seems like there is so much talk, but no real truth or good analysis.

    Comment by Chien-Yu Lin -

  95. Good essay, Mark. The difference is that you were misled by the market makers and the prospectus writers into thinking the stock would perform better, and this was intentional. I agree with your general message of caveat emptor but caveat emptor only cautions to avoid fraud — it doesn’t excuse it.

    Comment by Michael D. Hopkins (@mdhopkins) -

  96. You’ve mistaken a quick buck for mid-to-long term returns. Had Facebook’s CFO left some money on the table for Wall St. to make a buck, Facebook would have a market cap of about $60-$80 billion dollars right now, instead of the abysmal $37.35 and falling. Zuck could have outbid Steve Ballmer on a new aquisition a few months ago. In a few months from now, he won’t be able to outbid Marissa Mayer.

    Comment by David Spencer -

  97. Mark, I found the Sorkin piece so absurdly off base that I was moved to re-write it. Hope you and the community find it enjoyable: http://btanen.tumblr.com/post/30874332185/an-adaptation-of-andrew-ross-sorkins-ridiculous

    -Ben

    Comment by btanen (@btanen) -

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  100. Pingback: No, Facebook’s CFO is not to blame for the stock going down — Tech News and Analysis

  101. One significant caveat: Facebook used restricted stock units (RSUs), not options, for the vast majority of their employee incentives. That creates two issues: 1) it makes repricing more difficult; and 2) there is a significant looming tax event since, unlike options, RSUs have taxable value when they are issued. Facebook’s employee’s RSUs get taxed as ordinary income.

    It’s not clear how Facebook’s employees, or Facebook itself on their behalf, will pay that bill without selling a significant percentage of the outstanding stock (putting additional downward pressure on the company’s stock), turning over much of the proceeds from the IPO to the IRS, or taking on significant debt. The last of those three options (debt) is reportedly the currently favored option.

    While the IPO may have been successful for the company, that, in isolation, seems like a limited lens through which to evaluate the performance of the CFO. How Facebook manages its balance sheet through the challenges ahead will be much more instructive.

    Comment by Matthew Prince (@eastdakota) -

  102. “The CFO’s job is not to manage shareholder portfolios. His job is to help Facebook succeed.”
    My understanding is that a company is an association of individuals treated under the law as a single individual for the common goal of gaining profits. Those individuals are called shareholders and legally speaking they are “Facebook”. They employ other people (like this CFO) who are NOT “Facebook” but are only it’s employees. Those employees job is to manage the shareholder’s investment and see it make a profit. If the investors lose money on their investment Facebook is NOT succeeding but failing. The argument may be that the short term losses in value today will reap long term profits in the future. But it can’t be that it’s not their job to manage and make a profit on the investment the shareholders have made because in the long run that is the entire point of the whole apparatus. It’s backwards to think the CFO has done a good job as their employee managing their investment if he only sees them as suckers to be milked for maximum investments that they will certainly lose to make “facebook” (meaning it’s employees rather than the shareholder company that employes them) “successful”.

    Comment by Stephen Brock -

  103. Mark, you miss the point. FB lied to the investors and disclosed different info to the institutions than they gave to the general public. When they raised the price and size of the deal. They increased the offering into a book heavily weighted towards retail investor, never a good sign for the aftermarket trading of a stock.

    Selling at a higher price is ok. Withholding info and hoping no one will notice, is not good practice, if you need credibility to support the future of the business.

    Comment by James Haft (@jfhaft) -

  104. Off topic, but how sad and even pathetic that Mark would do this:

    -Anti-Occupy film “Occupy Unmasked,” dubbed the final work of the late conservative journalist Andrew Breitbart — distributed by Mark Cuban’s Magnet Releasing.

    He can’t just argue for lower taxes and less regulation, he has to stoop to Breitbart level (selective when not outright false) attacks on the messengers of a competing message? Is Capitalism really that weak of an argument that you can’t fight for it on the merits? Maybe after it broke in 2008 requiring socialism to bail it out, it really is that weak of premise. Still, very sad that Mark would put his name of crap like this:

    http://www.usnews.com/news/blogs/washington-whispers/2012/08/30/andrew-breitbart-anti-occupy-film-screened-at-rnc-with-heavy-police-presence

    Comment by richardsalzman (@richardsalzman) -

  105. Mark, you are right, it is absolutely the CFO’s accountability to maximize financial success for the company. And it is the responsibility of brokers to advise clients on pros/cons, and the investor invests at his/her own risk. Duh. But here’s where I think there are other factors to consider: The trust level in FB’s strategic future is being judged against their ability (or lack of it) to manage a financial undertaking at this level. Anybody you know think FB folks know how to handle themselves financially? I sure don’t.
    But here’s where the real responsibility lies: the fish smells from the head. Zuckerberg hired these people, he entrusted them, and he’s the one ultimately responsible. The bucks, or lack of them, stop with him. This IPO was mishandled and he’s responsible.
    We are responsible for our decisions as investors. The head of any company is ultimately responsible for the financial strategy and execution of their plans.

    Comment by Nancy Fox (@NancyFox) -

  106. He makes some great points, here. I like his quote, “When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me.” Interesting how he puts more blame on the buyer.

    Comment by tvspiegel -

  107. It’s all a matter of perspective. For Facebook Mr. Ebersman has done the best job ever, and filled his company’s war chest with the maximum amount possible. He has also done a fantastic job for the pre-IPO investors who sold in the IPO. Also for the banks Facebook’s CFO has done a great job, since they get part of their fees for the IPO in form of commission.

    It would be interesting to see how much of the initial IPO went to institutional investors, who should have known better, and which percentage ended up in retail, in the hands of moms and pops, who believed the flowery sales pitch of their financial consultant.

    I think, the banks, who led the offering, are behind the Facebook IPO debacle. To me, the stock market is an insider game, and it’s all about “finding-the-last-idiot”. This time around the banks found them at the IPO. The prospectus clearly said Facebook is playing by it’s own rules and we don’t recommend buying this stock. Nevertheless, the research done by the financial industry came up with insane PEs. Even now at $18, Facebook’s PE is five times that of Google and six time that of Apple. The banks have their work cut out for them, trying to mend relationships with their clients, who they talked into buying Facebook.

    Listening to Mr. Sorkin I just can’t get rid of the feeling that he bought at $38 and is now looking for somebody else to blame.

    Comment by Stefan (@stefanradtke) -

  108. Joe,

    None of your points have any bearing on what Mr. Cuban said. The CFO is NOT responsible for you getting a post IPO “pop.” The CFO is there to maximize THE COMPANY’S return, not make you trust the company. The CFO is there to manage the finances of a company, not your PERSONAL finances or beliefs.

    Everyone else,

    The drop in the price of the stock, is not that shocking, at least to me it’s not. This is a company run by children, with the exception of the CFO. It’s the Titanic of the IPO world.

    The IPO “debacle,” was created not by FB, but by outsiders. The press, desperate to make the economy sound better than it is, hyped this to the moon. Insiders who thought the old market rules still apply, pushed the stupidity to new heights. “journalists” reporting on the issue used Narrative reporting to fashion a morality tale that did not apply. It definitely did not fit reality.

    The media, insiders, investors, gov officials, and current admin worshippers all needed a scape-goat when their rose colored glasses failed to divine reality.

    Rational behavior was left at the door. It’s still waiting to be retrieved.

    Comment by Mark -

  109. I dunno, it was weird of you to buy FB stock in the first place, as anyone with a hint of knowledge about the company’s failing ad model and out-of-whack P/E ratios knew that a steep decline was all but inevitable. Personally I was so offended by the IPO price that I deactivated my account that very week and haven’t looked back. Facebook, in the end, is just a website. It’s not a company with a real product in any sense. It’s just another AOL/Yahoo/Myspace portal that had its brief day in the sun.

    Comment by Brade -

  110. Pingback: Facebook’s Awesome IPO

  111. Where are you getting $10b from? FB’s 10-Q shows $6.8b.

    Comment by Goran Ivanisevic (@stilted_engrish) -

  112. “like”

    Comment by Bad Bad Leroy Brown -

  113. Question Though? With a company like FaceBook is that enough? I know 10 billion dollars is too much for me to fathom, but for Face Book will that cover thier EBITDA? or is that why you Sold?
    I see what they did to stimulate the interest in a company for so long touted that they did not want to go public and I am sure that this cost may go into some of the legal bills. I am just questioning how analysts can call this a failure or success after only a few months, not to mention since Facebook is still around. I did not take long for MySpace to tank and become a center of adult adds, but Facebook IMHO has a better following than Twitter and seems more genuine and free of Catfish.

    Comment by Robbye Rob -

  114. i sort of agree with you. definitely shareholders are responsible for their own money and certainly the CFO needs to raise money at a good price. however, talk to fb employees regarding how they feel, or companies that took fb stock as part of an acquisition deal…..yes, they are all responsible for their own decisions, but an organization of people that feel betrayed and disillusioned is sub-optimal, in my opinion. hindsight is 20/20 and those inexperienced in financial markets are subject to beginners’ errors, but they should have seen the bubble forming and explored the history of what happens when goldman sachs’, a trading company, is the “smart money” driving the stock price.

    Comment by kidmercury (@kidmercury) -

  115. Something “Naked” is going to happen tomorrow morning on TV in Denver… Check out DineOut Colorado’s Restaurant Hound on Channel 2 Daybreak, Kwgn at 8:45am! http://www.facebook.com/dineoutcolorado

    Comment by Brad Kellmayer -

  116. This is the kind of stuff we need in our economy right now. Companies that care about their customers, their business and their employees MORE than the shareholders. If you want to motivate your workforce, give them a reason to care.

    Comment by Heather Buen (@dallassinglemom) -

  117. This is an interesting perspective. I do agree with you on maximizing the raise for the company, however I have two points here that I would be interested in your perspective. 1. This is not an overly capital intensive business so the difference in dollars isn’t as large for them as other businesses. They don’t necessarily need a specific dollar amount to accomplish some particular goal. They also have tremendous access to debt capital with the current partners. While I would never argue with you that more(cheap money) is always the answer, I would only say this is more true in a vacuum than for this particular company. 2. My second point here is that this company has a trust issue. Their 900 MM userbase was such an obvious fraud if you knew anything about how the “like” button worked(it has now finally been played out in the media). And if you are Mark Z and selling a relatively small amount of your shares (and you own the majority of the voting and willing to hold your shares for a long time) why wouldn’t you push for a lower opening. The one day pop thought is ridiculous and I agree that is PR bs, but when you “choose” to become a public company, managing the long term perspective of your business becomes an important element. Right now they have real a trust issue with their original stock pricing and their fake user base. I manage several businesses, and I always thought in terms of under promising and over delivering. That is/was impossible where they priced themselves. When I picture Mark Z. right now it reminds me of a prize fighter and his employees and bankers are the entourage telling him “Your the man, you don’t need to train champ to beat this guy, let’s go out to the club, and give me some money for my family”. Then he gets knocked out by a worthy opponent. What will he do next, does he care? I guess we will see.

    Comment by Joe Tauscher (@JoeTauscher) -

  118. Facebook is probably a good investment now because they have billions to develop their mobile presence and figure out how to monetize it. Instagram was a good buy, despite what everyone thinks.

    Comment by tom.light -

  119. Exactly right. Caveat emptor!

    Comment by Paul Lambert -

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